Propane exports, domestic demand hit inventory

In its Weekly Petroleum Status Report for the week ending Dec. 9, the U.S. Energy Information Administration reported a 3.629-million-barrel draw in U.S. propane inventory. The draw left inventory at 95.623 million barrels. It put inventory at 3.352 million barrels below last year’s record-high inventory level for the same week of the year. The inventory draw exceeded industry expectations for a 2.1-million-barrel draw and was significantly more than the five-year average of just over 1.3 million barrels for week 49 of the year.

Inventory began to decline in early October, but the mild start to winter caused inventory builds in late November. Inventory has resumed to the typical seasonal declines over the last three weeks.

For the week ending Dec. 10, the United States is at 11 more heating degree-days than normal for that week of the year, according to the National Oceanic and Atmospheric Administration. Overall, this winter heating season is 297 heating degree-days below normal and 48 heating degree-days below even last year’s mild winter.

Still, the week provided some insight into what can happen when both domestic demand and exports are solid in the same week. With heating degree-days up that week, U.S. domestic propane demand increased from 1.477 million barrels per day (bpd) for the week ending Dec. 2 to 1.502 million bpd for the week ending Dec. 9, up 25,000 bpd. Meanwhile, exports jumped from 725,000 bpd to 902,000 bpd, up 177,000 week over week. Combined export and domestic demand increased by 202,000 bpd, or about 1.4 million barrels, week over week.

Those demand numbers were also augmented by a 29,000-bpd drop in propane imports and a 66,000-bpd drop in propane production. Combined, the drops on the supply side contributed 95,000 bpd, or nearly 700,000 barrels for the week, to the increased inventory draw. The combined demand and supply impacts week over week is about 2.1 million barrels, which accounts for the increased draw on inventory week to week. The draw was 1.547 million barrels for the week ending Dec. 2 and 3.629 million barrels for the week ending Dec. 9.

Propane inventory remains near the record highs set last year. Still, propane is now valued at 51 percent of West Texas Intermediate crude, compared to 41 percent for Mont Belvieu and 35 percent for Conway at this time last year. The increase in the relative value of propane compared to crude is directly related to new export capacity and slowing growth in propane supply. Just looking at the inventory level does not reflect the entire change in the fundamental backdrop for propane.

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